Blow to Osborne as borrowing rises

Chancellor George Osborne's deficit-busting plans are struggling to keep up with full-year targets as official figures published revealed another rise in Government borrowing.

PUBLISHED: 09:56, Fri, Jul 20, 2012

Chancellor George Osborne came under more pressure as figures showed a rise in Government borrowing [PA]

Public sector net borrowing, excluding financial interventions, such as bank bailouts, was £14.4 billion in June, up from a revised £13.9 billion the previous year, the Office for National Statistics (ONS) said.

While tax revenues increased in the month by 3.6% to £40.9 billion, total Government spending only dipped by less than 1% to £52.4 billion.

The weak figures come after the International Monetary Fund (IMF) said the Chancellor should be braced to slow the pace of his tough austerity measures if the economy fails to come to life.

The Chancellor wants to trim borrowing in 2012/2013 to £120 billion, excluding a one-off boost from the transfer of the Royal Mail pension fund into Treasury ownership.

This compares with borrowing of £125.7 billion in the last financial year, which was revised down to below the Office for Budget Responsibility's (OBR) forecast of £126 billion.

Mr Osborne is in the process of rolling out billions of pounds of spending cuts and hundreds of thousands of public sector job losses in a bid to slash the budget deficit.

But the economy fell back into recession in the first quarter of the year, which has significant implications for tax revenues, while high levels of unemployment are increasing the burden on the state.

This was reflected in June's public finance figures, which showed a 0.1% drop in income tax to £10.8 billion and a 3.2% rise in social benefits, including unemployment claims, to £15.4 billion.

A Treasury spokesman said: "It is too early in the financial year to draw conclusions about the year as a whole. This is volatile data and is prone to revision - borrowing for last year has been revised again and is now estimated to be below the OBR's forecast."